Dow Theory Update

From my seat and in light of the price action this past week, I truly find the lack of understanding surrounding Dow Theory amusing. I also find the content from most any article on this subject to be inaccurate and/or typically misleading. Such erroneous articles result from the misunderstandings and/or the lack of quality study of Dow Theory, which in turn makes such articles dangerous to those who read them, as well as being a discredit to Dow Theory. In my experience, virtually 99.9% of all articles written on the subject of Dow Theory are wrong. I think this is because of the scarcity of the original writings by our Dow Theory Founding Fathers and again, the lack of quality research. More often than not, someone will make an erroneous Dow Theory call, then blame Dow Theory for being wrong or no longer applicable when it doesn’t work out. In reality, it always turns out to be the misapplication of Dow Theory. Dow Theory was just as applicable at the 2000 and the 2007 tops as it was at the 1966 bull market top or at the 1929 top when William Peter Hamilton wrote his article, A Turn in the Tide, in which he called the top. Also, the Dow Theory Primary Bullish Trend Change following the 2002 low and the 2009 low proved just as applicable as the one following the 1932 and the 1974 lows. To think that Dow Theory is somehow no longer relevant simply has no merit. Rather, what happens is we see erroneous applications of Dow Theory, which are then blamed on the theory rather than the error of the practitioner.

This post was published at Gold-Eagle on October 19, 2014.